FERC Standard for Temporary Deactivation of Facilities



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FERC Denies Request to Temporarily Deactivate Compression ? Future Review of Proposals Involving Temporary Cessation of Services

On April 27, 2011, the Federal Energy Regulatory Commission (?FERC?) denied a pipeline?s request, under Section 7(c)(1)(B) of the Natural Gas Act (?NGA?), to authorize the temporary deactivation for up to four years of twenty-one compressor units totaling 138,060 horsepower (hp) at nine compressor facilities. The pipeline had also requested that the reduction be reflected in the available unsubscribed capacity section of its electronic bulletin board for the duration of the temporary deactivation. El Paso Natural Gas Company, 135 FERC ? 61,079 (2011).

The compression at issue is primarily used for backup and is not needed to meet long-term firm obligations. The deactivation would reduce capacity by approximately 508 MMcf per day. At the end of the four-year period, the pipeline proposed to inform FERC of its plan to reactivate the compression or seek its permanent abandonment. There was disagreement on the alleged benefits and disadvantages to shippers from the temporary deactivation.

FERC held that it has used Section 7(c)(1)(B) to authorize certain temporary activities, including the temporary deactivation of compression to allow time to assess whether to replace or abandon those facilities, and summarized its prior decisions. However, FERC held that going forward it would ?evaluate all proposals involving cessation of services, on a temporary basis, pursuant to Section 7(b) rather than Section 7(c)(1)(B).? FERC observed that this approach may not lead to different outcomes, but that the present request ?goes beyond the minor operations of a temporary nature that have previously been exempted from certificate requirements under Section 7(c)(1)(B),? and held that the pipeline had not met its burden.

A closing footnote that deserves consideration states that to the extent the pipeline ?does not need to operate the subject facilities in order to provide requested service, it is not obligated under its certificate to do so.? And, since the pipeline presently maintained the compression ?in an idle state as backup or spare compression, . . . it may continue to do so without specific authorization from the Commission.?

Many terms may be used to describe the idling or deactivating of facilities. Deliberations and proposals to temporarily take facilities out of service should be assessed in accordance with this decision.

Should you have any questions about this alert, please contact me. For general questions involving energy law, please contact the Energy Team at Steptoe & Johnson PLLC.


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